Risk in Insurance in International Trades
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Risk in Insurance in international trades What are the various types of risk and uncertainty? Why do we get expose to the risk? The principle concept behind the risk in LPG. Because of globalization the global function and business are getting integrated. Due to the LPG fall of capitals and labour is increased due to this lots of risk exposes which the organization has to cop up with it. As the world market integrated more risk is there. What is risk? Any business you do is risk and in international business and trades there is more risk. PESTEL environment By the pestel we get the opportunities and threats. P- Political, if there is stable government and the trade policies and other policies form are suitable to do the safe business than it’s an opportunities. E- Economical , if you are looking for doing international business than all the developing nation is good to enter and do business eg- Asia, Africa , Latin America. Global economic risk are 1. Macro-economic condition of nation. 2. Economic & business cycle 3. Inflation data 4. Interest rate trends
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Risk in Insurance in International Trades
Transcript of Risk in Insurance in International Trades
Risk in Insurance in international tradesWhat are the various types of risk and uncertainty?Why do we get expose to the risk?The principle concept behind the risk in LPG.Because of globalization the global function and business are getting integrated.Due to the LPG fall of capitals and labour is increased due to this lots of risk exposes which the organization has to cop up with it.As the world market integrated more risk is there. What is risk? Any business you do is risk and in international business and trades there is more risk.
PESTEL environment By the pestel we get the opportunities and threats. P- Political, if there is stable government and the trade policies and other policies form are suitable to do the safe business than its an opportunities.E- Economical , if you are looking for doing international business than all the developing nation is good to enter and do business eg- Asia, Africa , Latin America.Global economic risk are1. Macro-economic condition of nation.2. Economic & business cycle3. Inflation data 4. Interest rate trends 5. GDP growth rate6. Increased or decrease in money 7. Fiscal policy8. Foreign trades data 9. Exchange rates 10. Capacity utilization 11. Employment rate behaviour 12. Monetary policy 13. Aggregate demand and supply 14. Growth inflation & unemployment
S- Socio- culture is the biggest risk in the global environment change because the life style, taste preference, expectability of the product are different.If the consumer behaviours are in our favour than its an opportunities,If not than it is risk we have to manage it, mitigate it and hedge risk (means get insurance)
T- Technology it is very important part to develop our business so we should always try to use the latest technologies. If the technology cant be developed, modernized and transfer than it is risk.
In developed country capital is an opportunities and in developing country labours and environment is an opportunities.
L- Legal - Norms, Rules, Regulatory environment.
There is positive correlation between the risk & return.If higher the level of risk than higher return is expected in form of profit.
The project is viable and expected if NPV is greater than zero.
Various Element of risk are Country risk Interest rate risk Political risk Exchange rate risk Risk Management Comes
Liquidity risk Commercial risk Credit risk Payment default risk
International trade risk
Transport risk Transit risk Cargo risk Marine risk Purchase InsuranceCalamity risk Product quality riskDamage risk
Country risk Country risk is the risk of nation social unrest, doing business in Syria, Ukraine.
Interest rate risk risk associated to the fluctuation of the interest rate.
Political risk government unstable
Exchange rate risk - FCL, Export & Import, FDI, FIIS
Eg- if we take a loan from foreign bank and the value of money is deprecate than there is negative effect.
If there is devaluation of money than its positive for exporter and negative for the importer If appreciated than positive for FCL and Importer and negative for exporter.
Please purchase insurance (premium on forward cover) taken from bank.
In a deprecating Ragin importer company taking foreign currency loan (FCL) are involved an insurance against fluctuation. In a volatile market witnessing Sharpe exchange rate fluctuation.It is advisable to insure a portion of foreign exchange exposer.In an appreciating Ragin- importer and borrower may not take insurance coverage but the exporter will rush to take insurance.
Liquidity risk - (Europe, Italy, Greek, Spain, Portugal, Ireland) there is risk of liquidity in this country, government financially become insolvent and use to get bank corrupt.
Commercial risk business risk, New product development, substitution risk A project is no longer commercially and technically viable due to intense competition risk Adverse development in business trends can bring about business in market risk
Payment default risk Letter of credit / bank guaranty
Irrevocable LCRevolving LC
Risk happen in the payment of open account
Please read second semester book of Export Import Management by Justin Paul and Rajiv Aserkar.Business risk Management and Coverage
